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Real Estate – John M. Lee

R.E. year in review

by John M. Lee

Richmond District single-family home prices rose for the seventh year in a row with median prices appreciating by 6 percent in 2018. There has been an increase of 112 percent from the real estate market’s low of 2011.

The Richmond home sales comparison table (in our print edition) shows the results in 2018 as compared with prior years.

The data was gathered from the SF Association of Realtors’ Multiple Listing Service and consists of single-family home sales in the Richmond, Lake Street, Presidio Heights, Jordan Park, Laurel Heights, Lone Mountain and Sea Cliff areas.

In 2018, there were 190 sales versus 160 in 2017 and 172 in 2016, an 18.8 percent increasefrom 2017 and 10.5 percent increase from 2016. The annual median price comparison shows a 6 percent increase year over year as compared to a 2.8 percent increase from 2016 to 2017, and a 9 percent increase from 2016. The amount of marketing time needed to sell a home was 14 days in 2018, 13 days in 2017 and 18 days in 2016, all indicating a very good market.

These results are from a buyer demand in excess of seller supply, a stable economy, low unemployment rates and fairly high consumer confidence … all positive signs for the real estate market.

During 2018, the major stock indexes did well the first nine months of the year, but dropped precipitously in the fourth quarter and especially in December.

As of the writing of this article, the Dow Jones Industrial Average has dropped 5.8 percent for the year; S&P 8.7 percent and the NASDAQ 7.7 percent.

Consumer confidence, which was rising throughout most of the year, decreased in November and December – the first time we have had consecutive declines in a long time. Our unemployment rate has been steady throughout the year, staying at about 4 percent, a level which represents full employment in the eyes of most economists. The interest rate had increased from about 4 percent to 5 percent by the end of the year for a 30-year fixed rate mortgage. The foreclosure of homes is still virtually nonexistent.

The prices of homes have risen substantially above that of the last peak in our real estate cycle so most homeowners have equity in their properties.

The real estate market lags the general economy, meaning it will follow the other markets up or down. The general sequence is that as the economy improves, more people have jobs and receive higher wages so they feel more comfortable getting into long-term commitments, like mortgages to purchase homes, thus fueling the real estate market.

Our market bottomed out in 2009, and with each cycle there are 2-3 years when we get substantial double digit appreciation. We have passed that point and currently are seeing the slowing of appreciation.

Locally, the demand in San Francisco and the Richmond District will continue to be good, but price appreciation has slowed down from double digits to a more sustainable rate. There were some properties listed towards the end of the year that were withdrawn from the marketplace because they did not sell, especially amongst the higher priced homes in the neighborhood.

The rise in interest rates and the decline in the stock market decreased affordability and caused some erosion of down payment money, a double negative for the housing market.

My prediction for 2019 is that we will have a decent real estate market but not as strong as the last seven years. It will continue to be a seller’s market with a shortage of good inventory and a leveling off of prices.

Therefore, if you are contemplating buying real estate, be careful of overpaying. If you are planning on selling, keep in mind that there is short supply and you should get a good price.

If you want to reposition your real estate portfolio, this is an excellent time to do so to take advantage of still low mortgage rates before they move up.

Wishing you all the best in 2019!

John M. Lee is a broker for Compass specializing in the Richmond and Sunset districts. For questions regarding real estate, call (415) 447-6231 or email johnlee@isellsf.com.